Closing of investigation No. VIZSG/1/2024 closed

The Integrity Authority has filed a criminal complaint on suspicion of budget fraud and using forged private documents after a company utilised nearly HUF 50 million of European Union funding in such a way that calls into question the project’s entire implementation. The Authority is advocating for the recovery of the disbursed funds.

Based on a report, the Integrity Authority has conducted an investigation into project no. VEKOP-2.1.7-15-2016-00435, supported under the Competitive Central Hungary Operational Programme (VEKOP). According to its website, the beneficiary is a company engaged in IT services, although its main registered activity shows business management and other management consultancy. The supported project’s initial goal, however, was different from both right from the outset, focusing on gas boiler developments and later shifting – by modifying the subject of the project – to the development of an innovative prebiotic milk powder product. The project’s funding, provided by the European Union, totalled HUF 49,971,000.

The Authority’s investigation found that all research and development activities of the project were outsourced to a different company, which in itself raises questions about eligibility, as the call for proposals was aimed at supporting in-house prototype development by small and medium-sized enterprises. The project also failed to meet the criterion of professional feasibility. At the time of submitting the grant application, the company was a startup without employees and did not plan to hire staff for the project’s implementation either.

The Authority found that in the course of the project’s implementation, the beneficiary selected the company for research and development activities in a controlled, prearranged manner, and that the companies that submitted unsuccessful bids belonged to a common interest group.

The company selected to conduct the research either failed to perform its professional tasks entirely or executed them in a manner inconsistent with the project accounts, featuring documents that listed a researcher who did not participate in the project; furthermore, the Authority was provided contradictory data regarding the quantities of procured and used raw materials. To fulfil its obligations undertaken in the project, the company sold the milk powder prototype and know-how to a firm registered in Germany with the business activity of “sale of outdoor plywood”. Subsequently, the payment for this transaction was withdrawn from the company’s account in cash the day after the credit entry.

Having found no indication as to whether the IT company’s project to develop innovative prebiotic milk powder was consistent with regulations and the accounts submitted to the managing authority, the Integrity Authority has filed a criminal complaint against unknown person on suspicion of budget fraud and using forged private documents. Furthermore, it has also initiated irregularity proceedings with the Managing Authority of VEKOP, recommending the termination of the grant contract and the recovery of HUF 49,971,000 of disbursed funds, including interest.